AVM J. RAJENDRA, AVSM, VSM (RETD.), MEMBER

1.      The present First Appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (“the Act”) against the Order dated 10.12.2014 passed by the learned Tamil Nadu State Consumer Disputes Redressal Commission Chennai (hereinafter referred to as “the State Commission”), in Consumer Complaint No. 57 of 2012, wherein the Complaint filed by the Respondent was partly allowed.

2.      For the sake of convenience, the parties in the present matter being referred to as mentioned in the Complaint before the State Commission. “M/s. Duroflex Private Ltd” is identified as Complainant/ Respondent and "The Oriental Insurance Company Ltd." is referred to as the Appellant/Opposite Parties/Insurer.

3.      Brief facts of the case are that on 19.10.2009 at about 03.20 AM Fire broke out at the Complainant's manufacturing unit situated at Kumaranapalli Village, Denkanikottal Taluk, Krishnagiri District, TN during Deepavali festival and the cause of fire was bursting of crackers in vicinity and the splinters falling on the roof of the factory. The complainant covered the establishment under the Standard Fire and Special Perils Insurance Policy Nos.441901/11/2009/406 and 441901/11/2009/466.

4.      The policy pertains to Plant and Machinery and Building, and the total sum insured was Rs.9,88,00,000/- towards plant, Machinery and Building. The annual premium of Rs.3,67,019/- was paid. The Plant, Machinery and Building is insured on market Value basis. The stocks in process were insured for Rs.4,50,00,000/- and the premium paid is Rs.1,86,827/-. Total premium paid was is Rs.5,53,846/- for both the policies, for insuring the property at Market value. The List of machineries annexed to the insurance policies and insurance surveyor report reveals that the plant and Machinery and Building were insured at Market value. Consequent to the Fire Accident, the OP had deputed an insurance Surveyor from Coimbatore to assess the loss and submit a Report. Though the Surveyor immediately visited the premises, he submitted his Report dated 16.06.2010 after a lapse of nine months. After the fire accident, to confirm the adequacy of sum insured for the buildings, the OP had also appointed a government approved valuer, who valued the building assets at Rs.4,29,97,345/- excluding the quilting section building. As regards the buildings destroyed in fire, the Govt approved valuer has taken depreciation at 13.5% in his report dated 01.11.2009. Whereas, the insurance surveyor in his report dated 16.06.2010 has taken 27% depreciation for buildings, which exposes the anomalies in the depreciation norms adopted by the OP and their double standards.

5.      After the Fire accident the OP did not settle the insurance claim for over 12 months and only after repeated follow-ups and personal liaison, they came forward and belatedly settled about 24% of the originally claimed amount. The Fire Accident completely destroyed the buildings in the quilting Section and gutted the electrical fittings and machinery which had to be completely scraped. Consequently, production in quilting Department stopped and the semi-finished Mattresses had to be sent outside for quilting. There was no choice except to rebuild the Quilting Dept and replace it with new machinery, without delay. However, this process of reconstruction and production took three months. Cost of Civil work alone was Rs.32,82,178/-. Consequent to the fire accident they submitted claim on 04.11.2009 for Rs.1,57,26,600/- of which Rs.41,49,027/- was for Quilting building; Rs.91,41,180/- towards Plant & machinery; Rs.6,23,397/- for electrical erections; and Rs.18,12,996/- towards stock. Whereas, the OP belatedly settled a part of the insurance claim for Rs.37,37,853/-, while there is a shortfall of Rs.1,19,88,747/-. The cost of new Quilting machine is Rs.82,93,275/-. However the said quilting machine was insured at Rs.85 lakhs towards replacement cost of the machine. The OP had settled part claim of Rs.17,00,000/- for the said machine. So they are bound by policy terms to pay balance of Rs.65,93,275/- along with applicable rate of interest. They were surprised on coming to know that the OP had sanctioned only repairs to the building. Even though the claim was Rs.41,49,027/- for reconstruction of quilting section building, they agreed for settlement of claim at Rs.29,00,000/- to remain within the pecuniary jurisdiction of the State Commission. The OP had already accepted their liability by part settling the claim for Rs.37,37,853/- whereas the major portion remains unsettled. The Plant & machinery and Building was insured for market value and now the OP cannot wriggle out of their commitment by adopting devious methods to deny the legitimate claims through illegal, improper and unfair exclusions. When they protested the part settlement, vide letter dated 19.04.2011, vague explanations were given their letter dated 06.06.2011. Thus, they filed the complaint before State Commission seeking the following:

(a) To hold and declare the opposite parties guilty of the deficiency in services as per the provisions of the said act;

(b) To direct the opposite parties to fully and finally settle the Insurance claim for Rs.98,14,798/- of which Rs.69,14,798/- is towards plant and Machinery and Rs.29,00,000/- is towards building;

(c) to direct the Opposite Parties to pay interest at 18% per annum on all belated payments which may however be restricted to not more than Rs.85,000/- depending upon the overall outcome of the case and entirely at the discretion of the Hon’ble State Commission.

(d) To direct the Opposite Parties to pay an amount of Rs.50,000/- to the Complainant towards cost, compensation and mental agony suffered by the Complainant on account of belated settlement of the claims and unfair trade practices adopted;

(e) For such other and further reliefs as the nature and circumstances of this case may deem fit and proper;

6.      The OPs filed their reply contending that the Complainant had availed Standard Fire and Special Perils Insurance Policy No.441901/11/2009/466 valid from 16.02.2009 to 15.02.2010 for Rs.9,88,00,000/- (Rs.3,00,00,000 for building, Rs.1,113,00,000/- for plinth and Foundation and Rs.5,75,00,000/- for Plant and Machinery). Another such Insurance Policy No.441901/11/2009/406 was availed valid form 01.12.2008 to 30.11.2009 for a total sum insured of Rs.4,50,00,000/- in respect of stocks in process. The claim lodged by the Complainant was in respect of loss/damage to plant, machinery, building and stocks under both policies. The total claim filed on 04.11.2009 was for Rs.1,57,26,600/- (Rs.41,49,027/- for quilting building, Rs.91,41,180/- for plant and machinery, Rs.6,23,397/- for electrical erections and Rs.18,12,996/- towards stock of quilting cloths and rolls). The surveyor undertook survey and valuation of the affected property and stocks. Based on interactions with the insured he filed his report dated 16.06.2010. It was found that in the fire accident, the northern portion roof of the quilting section building had fallen. The side walls got damaged to some extent. The quilting machine room roof got fully damaged and roof trusses got bent and reshaped. In respect of plant and machinery, the quilting machine, fire extinguishers, air conditioners, air compressor, electrical wirings and fittings, lamination machine, computer and furniture, single needle long arm sewing machine, stitching machines (two numbers) and three phase stabilizer got damaged. As for stock and stock in process, the quilting cloth materials and semi-finished quilting rolls were damaged. As per the survey report, it was obvious that the Complainant did not properly understand the distinction between market value basis and reinstatement value basis and erroneously alleged that the insurance was on market value basis alone. More so, the major complaint of the insured is confined to adjustment of loss on the machinery for Rs.17,00,000/- for the quilting machine, which was 20 years old, as against the purported market value of Rs.82,93,275/-. If only, the Complainant carefully considered the concept of market value based indemnity and reinstatement value basis indemnity, they would readily accept the payment made by insurer, without indulging in this unnecessary litigation. The quilting machine was purchased on 25.10.1993 as second hand machine and it was 20 years old as on the fire accident dated 19.10.2009. If so, the adoption of the method as found in annexure to survey report dated 16.06.2010 produced by the complainant itself. The insurer had carefully considered the report of the surveyor dated 16.06.2010, juxtaposed the findings under the two contracts of insurance and found the claim admissible as a case of accidental fire. Considering the chemical nature of the stocks in question, it appointed M/s Geo Chem to verify the nature of occurrence and scrutinize the accidental nature of fire. Vide report dated 04.10.2010 M/s. Geo Chem confirmed that the fire occurrence dated 19.10.2009 was accidental. By letter dated 26.10.2010, within 4 months of receipt of the survey report dated 16.06.2010, the OP made the offer to the Complainant for settlement of the claim. The Complainant accepted the letter/ discharge voucher dated 26.10.2010 under protest and without prejudice. Admittedly the machinery in question are old and second hand. In the survey report also LR gave good and valid reasons for arriving at net liability of insurer on such market value basis. Thus, in respect of plant and machinery, LR worked out the total sum at Rs.94,32,380/- minus Rs.71,23,156.50 equal to Rs.23,09,224.50. It is market value at Rs.17,00,000/- fixed by LR from the present value of Rs.85,00,000/- upon depreciated value of Rs.68,00,000/- towards loss / damage to quilting machine that is the major grievance of the complaint. LR had considered the estimate for Rs.36,52,200/- for total construction of the quilting section building. LR found that half of the building roof had alone fallen. The rest of it was surviving and in good condition. The Complainant cannot insist for replacement when the technical opinion states that repairs were sufficient. Hence, the assessment of loss towards building made in all at Rs.10,30,000/- is in order and consonance with the terms and conditions of contract.

7.      Admittedly the quilting machine was purchased second hand on 25.10.1993.  There was no categorical valuation for a similar quilting machine which was 20 years old. Thus as per practice, LR deleted the upgradation and advancement and discounted the value to arrive at the value of an equal output machine to fix the value of the affected quilting machine as on 16.10.2009. Upon such valuation, and item wise for each item comprising plant and machinery, LR arrived at the total loss at Rs.23,09,224.50. LR did not have the benefit of quotation for a similar quilting machine of 20 year vintage, Accordingly, LR devised permissible and practical ways and means to bring down the value of an upgraded, higher end, quilting machine. The value of semi-finished quilting roll was taken from costing details and after deducting profit margin the value was fixed at Rs.2,84,98 and the loss of stocks was arrived at Rs.14,36,874.07. The LR adjusted the loss iro Plant, Machinery and Stocks at Rs.1,20,56,463.91 on the basis of reinstatement value. The LR took note of salvage at Rs.6,11,076/-. Upon receipt of the survey report dated 16.06.2010, the OP sought clarifications from LR and received the addendum report dated 14.07.2010. Thereafter, the OP offered settlement for Rs.37,37,853/- under both contracts. By letter / mail dated 8.07.2010 the OP sought clarification/ bifurcation of loss under both policies by an addendum report on the assessment of Rs.1,57,266/- towards debris removal.

8.      Under the contract of insurance, spontaneous combustion is not an insured peril, being exclusion. Hence, the OP was compelled to verify and confirm that the occurrence of fire was not due to any such spontaneous combustion, to decide on admissibility of the claim. The OP fairly referred the said aspect to an expert Chemical technologist and upon confirmation that the Fire Accident was accidental, the OP eschewed reliance on the report dated 10.11.2009 of the Inspector of Factories. From the above sequence, it is clear that there is no basis for alleging any deficiency in service on the part of the insurer. The Complainant had completely misunderstood the scope and cover under such contracts of insurance on market value basis that too, in respect of secondhand machinery which was 20 years old. The Complainant is fully aware f both the policies of insurance and the distinction between market value and reinstatement value clauses and their implications on computation of indemnity. LR also had detailed discussions with the Complainant's Civil Contractor Mr. Sakthivel regarding the repair work of the damaged building and only thereafter LR finalized his assessment. The complaint, despite annexing the FSR to the Complaint, is silent about it and does not challenge this finding. If so, the averments to the contract are made for the purpose of the complaint. The OP contended that there is no merit in the complaint and the same is liable to be dismissed.

9.      The State Commission vide order dated 10.12.2014 in C.C. No.57/2012 passed the following directions:

(a) The Opposite Parties jointly and severally to pay a sum of Rs.60,68,354/- less Rs.23,11,647/- = Rs.37,56,707/- with 9% interest or Rs.85,000/- as restricted by the Complainant in the relief prayed for whichever is less from the date of receipt of the amount Rs.37,37,853/- dated 26.10.2010 paid to the complainant towards the insurance claim made against the building, plant and machinery till the date of realization; and

(b) Also to pay a sum of Rs.20,000/- to the Complainant towards costs.

(c) The directions shall be complied within a period of 6 weeks from the date of this order.

10.    In the Appeal, the Appellant mainly raised the following grounds:

(a)  The State Commission erred in giving out an arbitrary value of depreciation to be deducted on the loss. The calculation made by the surveyor was based on his detailed survey. It cannot be rejected without repudiating the surveyor's report itself.

(b) The underinsurance deduction was based on Govt valuation officer report only on quilting section building. It was erroneously held the same to be unfair and unnecessary while it was done as per standard industry practice, without citing any reason.

(c)  Depreciation factor of 40% for the machinery is considered arbitrary whereas the surveyor clarified that the machinery is over 20 years old and should be depreciated at 80%. The 40% depreciation is arbitrary manner without asserting any reason.

(d)  The State Commission arrived at a different finding than the surveyor. The Complainant never disputed the report. Without disputing the report different finding cannot be drawn.

(e)  The State Commission has not considered the survey report in its entirety, which is a statutory document. In practice, the Survey report alone is sufficient for final decisions. The Hon’ble Supreme Court n United India Insurance Co. Ltd. Vs Roshan Lal Oil Ltd it has been held that the surveyor's report is an important document and its non-consideration would result in serious miscarriage of justice. In Oriental Insurance Vs Sony Cheriyan (1999) 6 SCC 451 it was held that: “the insurance policy between the insurer and the insured represents a contract between the parties Since the insurer undertakes to compensate the loss suffered by the insured on account of risk covered by the Insurance policy, the terms of agreements have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy."  There was no deficiency in service by the OP as it has acted with all due diligence and has relied upon the report of the surveyor, as per the terms of the policy within 3 months of receipt of surveyor's report.

11.    The Respondent/Complainant has not filed any Reply to the present Appeal. However, the Complainant filed written synopsis along with additional written arguments.

12.    The learned Counsel for the Appellant/ OP in his arguments comprehensively reiterated the grounds of appeal and emphasizing that the State Commission arrived at a depreciation factor of 40% for machinery in an arbitrary manner whereas the duly appointed and IRDA certified surveyor in his report has clearly brought out that due to the machinery being more than 20 years old, the same should be depreciated at 80%. Moreover, the State Commission failed to give reason while reducing the amount of depreciation decided by the Surveyor. The Counsel has relied on Hon’ble Supreme Court in “Khatema Fibres Ltd. Vs. New India Assurance Company Ltd. and Ors., MANU/SC/0719/2021 in support of his arguments.

13.    The learned Counsel for the Respondent/Complainant reiterated the averments in the Complaint and the evidence filed before the State Commission. He relied on the Hon’ble Supreme Court in New India Assurance Company Limited vs. Pradeep Kumar, (2009) 7 SCC 787 and Dharmendra Goel Vs. Oriental Insurance Company Limited, (2009) 8 SCC 279 in support of his arguments.

14.    We have examined the pleadings and associated documents placed on record and thoughtfully heard the detailed and intense arguments advanced by the learned Counsels for both the Parties.

15.    It is undisputed that that the Complainant had obtained Standard Fire and Special Perils Insurance policies, encompassing coverage for the building, machinery and stocks. Subsequent to a fire incident on 19.10.2009, the Appellant/OPs engaged an investigator and a Government approved valuer to ascertain the loss and submit a report. Both assessed the depreciation of the property under claim at varying rates: 35% for building, 27% for machinery, and a substantial 76% for machinery. Following this, the Complainant filed a claim totaling Rs.1,57,26,600. The surveyor appointed by the OPs, vide report dated 16.06.2010, evaluated the loss at Rs.38,85,888, whereupon the OPs settled the claim of the Complainant for Rs.37,37,853. Notably, the Complainant accepted the payment under protest, endorsing "accepted under protest without prejudice" on the Discharge Voucher dated 26.10.2010. The Complainant, under protest, contested the OPs consideration of the claim, arguing that the policies were based on market value for machineries and building and no depreciation should apply during claim settlement, given that the insured declared value aligned with the market value, a factor accepted during policy issuance.

16.    On the other hand, the OPs admitted the issuance of policies to the Complainant, clarifying that the Complainant availed Standard Perils policies for a specified period, totaling Rs.9,88,00,000 and an additional sum of Rs.4,50,00,000 pertaining to the stock in process. After the fire accident, Mr. GP Livingstone Rose, the surveyor was appointed. Based on his inspection and assessment, the claim underwent necessary adjustments for depreciation, value averages, among other pertinent details. The machinery, all assessed as over 20 years old, particularly the quilting machine acquired on 25.10.1993 as a second-hand purchase, were evaluated at a purported market value of Rs.82,93,275. However, the Complainant confined the loss adjustment towards machinery solely to Rs.17,00,000, consequently leading to an evaluation of Rs.37,37,853. The OPs contested that instead of opting for a 'Reinstatement' value basis as per the policies, the Complainant opted for the same purported market value.

17.    The State Commission in its Order dated 10.12.2014, made the following observation:-

“…..On perusal of those documents under Ex.B14 relates to the Claim Scrutiny Form for the policy Nos. 441901/1 / 2010 / 000001 for the building and the same was estimated for Rs.3,15,00,000/- and the plant and machinery estimated Rs.5,49,50,500/- and plinth and foundation for Eq cover for Rs.1,13,00,000/- for which estimated loss of building was mentioned for Rs.41,49,027/- and for plant and machinery Rs.97,64,577/- in all for Rs.1,39,13,604/- for which provision made for the claim for Rs.23,15,00,000/- by taking into consideration of assessment or loss for building Rs.10,30,000/-.Taking into depreciation for Rs.3,09,025/- and thereby after arriving salvage for Rs.3,50,000/- assessed loss was estimated for Rs.3,70,974/- from which another sum of Rs.1,17,317/- reduced as under insurance and thereby adjusted loss was estimated Rs.2,53,657/- when the total loss of building was estimated for Rs.10,30,000/- and by reducing certain amount for depreciation of salvage value under insurance and they finally decided the adjusted loss for Rs.2,53,657/- When the policy was taken from the year 2009 and within 8 months the occurrence was taken place while collecting premium for the same more than Rs. 1,00,000/-categorizing various amounts for various items to be covered under peril towards building, plant and machinery estimated on the basis of market value. Once again by deducting amounts towards depreciation to the extent of 1/3 and for under insurance for Rs. 1,17,317/- which are all in our view unfair and unnecessary when the insured items were estimated for the market value without insisting for another reinstatement value within short period. Those deductions are not appropriate and thereby we are estimating the loss of the building after deduction of salvage less Rs.3,50,000/-, the loss for the building would be Rs. 10,30,000/- - 3,50,000/- = Rs.6,80,000/- and as far as the assessment for loss for plant and machinery, it is decided as loss for Rs.94,32,380/- for which a depreciation of Rs.71,23,156/- and less salvage value of Rs.2,61,076/- were deducted and finally adjusted loss was estimated for Rs.20,48,147.50 in which also we are of the view when the opposite party themselves contended that the machinery was second hand in nature and having adjusted loss of Rs.20,48,147/- and the occurrence taken place within 8 months from the date of policy for which a depreciation around 65% was made to the extent of Rs.71,23,156/- cannot have no basis. The complainant submitted that the depreciation in market value may be considered for 8 months of the basis because Fire accident took place after 8 months into the renewed policy rendered by 11% between two renewal periods under ExA3 & A4.

Hence we are of the view since the complainant had not produced any material value for plant and machinery to determine the value as prescribed and thereby we are inclined to allow only 40% of the value of the machinery for Rs.94,32,380/- towards depreciation and thereby the loss of plant and machinery would be Rs.37,72,950/- thus Rs.94,32,380/- less Rs.37,72,950/-=Rs.56,59,430/- out of which a sum of Rs.2,61,076/- is to be deducted towards salvage value and thereby the claim should be allowed for Rs.56,59,430/- less Rs.2,61,076/-= Rs.53,98,354/- and thereby the net loss towards those items assessment for loss of building is for Rs.6,80,000/- and towards assessment for plant and machineries for Rs.53,98,354/- as discussed above in all for Rs. 53,98,354/-+Rs.6,80,000/- = Rs.60,78,354/- in which a sum of Rs.10,000/- is to be deducted as per policy excess and thereby the total loss should be Rs. 60,78,354/- less Rs.10,000/- = Rs.60,68,354/- is all the amount we are inclined to consider towards loss of building and loss for plant and machinery against the claim allowed by the opposite parties for Rs.23,14,723/-. As far as the claim relating to the stocks was scrutinized after the surveyor's report and assessment and other materials after the details under Ex.B15 surveyor's recommended for Rs.14,26,874/-. Even though the estimated loss of stocks for Rs.18,12,996/- and the provision made for the claim was Rs.14,30,000/- without making any deductions towards salvage or any other depreciation / under insurance except the excess policy amount of Rs.10,000/- as per policy the net loss was assessed for Rs.14,26,874/- which was not disputed by the complainant and this amount of Rs.14,26,874/- was added along with loss depreciation towards building, plant and machineries was Rs.23,14,722/- under Ex.B14 in all for Rs.37,37,853/- as per EX.A13 which was received under protest and now since we have decided to consider the claim towards machineries, building plant etc for Rs.60,68,354/- out of which since they already a claim for Rs.23,11,647/- was settled as per Ex.B14 the complainant is entitled for the amount of Rs.60,68,354/- less Rs.23,11,647/-= Rs.37,56,707/-. Hence to that extent alone the complainant's claim could be considered accordingly we are of the view that the opposite parties are in deficiency of service in deciding the correct claim amount.

18.    On examination of the order of the learned State Commission and considering the grounds presented in this instant appeal, it is our considered opinion that the insurance company's contention that ‘the State Commission arrived at a 40% depreciation factor for machinery in an arbitrary manner’ is unfounded. This is in contrast to the report submitted by the duly appointed and IRDA certified surveyor, who indicated that, due to the machinery's age surpassing 20 years, a depreciation of 80% should apply. Moreover, a recent judgment by the Hon’ble Supreme Court in the case of Oswal Plastic Industries v. N.A.I.C.O. Ltd., 2023 SCC OnLine SC 43, dated 13.01.2023, dealt with comparable facts and circumstances. The Supreme Court ruled that the insured party is entitled to the reinstatement value rather than the depreciated value in such situations. The relevant portion of the Order reads as under:

“15. While dealing with the aforesaid issue, relevant clause 9 of Section 2 of the policy is required to be considered, which reads as under:—

“9. If the Company at its option, reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss or damage, or join with any other Company or Insurer(s) in so doing the Company shall not be bound to reinstate exactly or completely but only as circumstances permit and in reasonably sufficient manner, and in no case shall the Company be bound to expend more in reinstatement than it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage nor more than the sum insured by the Company thereon. If the Company so elect to reinstate or replace any property the insured shall at his own expense furnish the Company with such plans, specifications, measurements, quantities and such other particulars as the Company may require, and no acts done or caused to be done, by the Company with a view to reinstatement or replacement shall be deemed an election by the Company to reinstate or replace.

If in any case the Company shall be unable to reinstate or repair the property hereby insured, because of any municipal or other regulations in force affecting the alignment of streets or the construction of buildings or otherwise, the Company shall, in every such case, only be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition.”

16. On true interpretation and on fair reading of above clause, firstly the option is given to the insurance company to reinstate or replace property damaged or destroyed instead of paying the amount of loss or damage. If the insurance company exercises the option of reinstatement or replaces the property damaged, the company shall not be bound to reinstate completely or partly but only as circumstances permit and in reasonably sufficient manner, and in no case shall the company be bound to expend more in reinstatement than it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage not more than the sum insured by the company thereon. However, in any case the company is unable to reinstate or repair the property insured, because of any municipal or other regulations in force affecting the alignment of streets or the construction of buildings or OTHERWISE, in that case, the company shall be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition. Present is the case dealing with second eventuality, namely, the company was unable to reinstate or repair the property. The surveyor in its report determined the loss on the basis of reinstatement value at Rs. 29,17,500/- and on the basis of depreciated value at Rs. 12,60,000/-. Though, the complainant claimed Rs. 76,64,000/- being the value of the new machinery, however, as rightly observed by the State Commission as well as the NCDRC, the complainant shall not be entitled to the said amount. However, at the same time considering second part of Clause 9 reproduced hereinabove, in case company is unable to reinstate or repair the property insured, the insurance company shall be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition. For the aforesaid purpose, the report of surveyor would be relevant evidence to consider the sum required to reinstate or repair. Therefore, as per second part of Clause 9 of Section 2 of the policy, the complainant shall be entitled to the reinstatement value and not the depreciated value. The NCDRC has mis-interpreted and mis-read the Clause 9. The NCDRC has seriously erred in observing and holding that the insurance company shall be liable to pay the depreciated value only and not the reinstatement value. The State Commission was absolutely justified in awarding the reinstatement value. The impugned judgment and order passed by the NCDRC awarding the depreciated value and not the reinstatement value is unsustainable for the reasons stated hereinabove.”

17. In view of the above and for the reasons stated above, the present appeal succeeds. The impugned judgment and order passed by the NCDRC is hereby quashed and set aside. The order passed by the State Commission is hereby restored. The complainant shall be entitled to Rs. 29,17,500/- being the reinstatement value with interest @ 7% from the date of order of the State Commission i.e., 10.11.2014 till the actual payment. The present appeal is accordingly allowed. No costs.”

19.    We observed that the surveyor, in the report dated 16.06.2010, initially assessed the loss on a reinstatement value (RIV) basis, before policy exclusions, at Rs.1,20,56,463.91. Subsequent to loss adjustments, the final evaluated loss amounted to Rs.38,85,888, leading to the OPs settling the claim for Rs.37,37,853. However, the Complainant accepted the payment under protest, endorsing "accepted under protest without prejudice" on the Discharge Voucher dated 26.10.2010. The learned State Commission, as against 80% depreciation determined by the surveyor for the second hand machine which has been used for 20 years, allowed only 40% of the machinery value of Rs.94,32,380 as depreciation amounting to Rs.37,72,950/- and calculated that, on deducting Rs.37,72,950/- from Rs.94,32,380/- the balance is Rs.56,59,430/-. Of this, Rs.2,61,076/- is to be deducted towards salvage value i.e Rs.56,59,430/- less Rs.2,61,076/- = Rs.53,98,354/-. Adding Rs.6,80,000/- which is the assessed loss to the building to the assessed loss of Rs.53,98,354/- towards plant and machinery, the total is Rs.53,98,354/- + Rs.6,80,000/- = Rs.60,78,354/-. On deducting Rs.10,000/- towards policy excess, the total loss is Rs.60,68,354/-. Of this, a claim for Rs.23,11,647/- was settled, against the machinery. Therefore, the learned State Commission considered that the Complainant is entitled for Rs.60,68,354/- less Rs.23,11,647/- = Rs.37,56,707/-.

20.    Notwithstanding said calculations, the State Commission did not state the rationale for reducing the depreciation from 80% to 40%, a decision already determined by the Surveyor, which was contested.

21.    In the given situation, the assessment made by the Surveyor, after following necessary site visits and thorough scrutiny of records, is deemed to carry more weight than the claims put forth by the Complainant. This stance is in alignment with numerous judgments of the Hon’ble Supreme Court, which emphasize the pivotal role of the Surveyor's assessment as a foundation for settlement. Rejecting the Surveyor's assessment requires substantial and valid reasons, and such justifications must be clear and cogent, which is not evident in this case. Further, the State Commission did not provide the rationale for altering the depreciation value of the machines from 80% to 40%.

22.    The settlement of the claim, amount under protest, was based on the Surveyor's report, which employed a systematic and logical calculation on a machine admittedly procured as a second hand machine and used for 20 years. The vintage of the machine is also evident from the fact that such machines are not available in the market and thus its reasonable market value could not be ascertained. Having inspected and considered the vintage of the second hand machine which has already been utilised for about 20 years, the surveyor assessed its depreciation as 80%, which is considered fair and reasonable. Therefore, we are of the considered view is that the learned State Commission erred in arbitrarily reducing the depreciation value of the machines duly determined by the surveyor, from 80% to 40%, that too without assigning any reasons for such consideration.

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23.    In view of the foregoing discussion, the impugned order dated 10.12.2014 of the State Commission passed in C.C. No.57/2012 is set aside.  Consequently, the First Appeal No.105 of 2015 is allowed.

24.    All pending Applications, if any, are disposed of accordingly.

25.    The Registry may refund the statutory amount or any amount deposited, if any, by the Appellants along with accrued interest as per law.